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When it comes to leasing a car, there are a lot of misconceptions. From ownership options to de-hire charges, it is easy to see why some customers are confused about how leasing works.

To help dispel some of the myths surrounding car leasing, we have put together 10 of the most common car leasing misconceptions to help explain exactly what you can and can't do when leasing a car.

1. Who owns the vehicle at the end of the agreement?

Whether you (the customer), your business or the finance company takes ownership of the car at the end of the agreement will depend on the type of contract you have taken out at the start of the contract.

When it comes to Personal Leasing there are three types of leasing contract:

  • Personal contract hire where the FINANCE COMPANY owns the car at the end of the contract, you return it without any further obligations.
  • Personal contract purchase (PCP) where either YOU or the FINANCE COMPANY owns the vehicle at the end of the lease, depending on the option you chose at the start of the contract.
  • Personal lease purchase where YOU own the car at the end of the agreement

When it comes to Business Leasing agreements: there are four types of leasing contract:

  • Business contract hire where the FINANCE COMPANY owns the car  at the end of the contract, you return it without any further obligations.
  • Business contract purchase where either YOU or the FINANCE COMPANY owns the vehicle at the end of the lease depending on the option your business choice at the start of the contract.  
  • Finance lease where the FINANCE COMPANY owns the vehicle at the end of the lease
  • Business lease purchase where THE BUSINESS owns the car at the end of the agreement

2. Who pays the road tax?

Your lease agreement includes Road Fund Licence (otherwise known as vehicle tax or road tax) for at least 12 months or the duration of the contract depending on which type of agreement has been taken out.

For Contract Hire or Personal Contract Hire agreements, the finance provider will pay the vehicle tax for the duration of the agreement, as they will remain the registered owner of the vehicle.

For Finance Lease, Contract Purchase and Personal Contract Purchase agreements, the road tax will be provided for the first 12 months of the contract, after which the responsibility passes onto the customer.

It’s worth noting that as of October 2014, paper tax discs are no longer issued by the DVLA. Vehicles will still need to be taxed, but physical tax discs will no longer be sent out by funders.

3. What happens if I exceed the agreed mileage on the lease contract?

When you sign the leasing contract, you agree to keep within certain mileage perimeters and any excess mileage over that amount is set at a pence per mile (ppm) rate that you agree to when you sign the contract.

For example, if the excess stated in your agreement is 5p per mile, and you exceed your mileage allowance by 1,000 miles, you would be charged £50.

4. Is it possible to get out of the contract early?

Early termination is at the discretion of the finance provider and is not available on all contracts. Our blog post on Ending Your Lease Contract Early tells you all you need to know about early termination including the criteria, the fees and the process involved. 

Your first step, if you should want to terminate your agreement early, is to contact Nationwide Vehicle Contracts on 0345 811 9595 to discuss your options.

5. Can I renegotiate aspects of my lease?

We understand that during your lease period - even short ones of two or three years - that things can change in life. You may move home or change jobs resulting in a change to your agreed annual mileage or your financial situation may change in such a way that the repayments on the lease car are not affordable (e.g. job loss or bankruptcy).

Changes to your contract will be made at the discretion of the finance company that is providing the vehicle lease so it is important that you contact your finance provider to find out what options are available to you. Most providers will allow you to change the mileage or extend your contract but it ultimately depends on what type of contract you have taken out and certain criteria applies.

6. Is it possible to change the lease mid-contract to another make or model?

Again, this is down to the finance company but it may be possible to change into another vehicle by settling your current contract.  Settlement figures typically cost between 50% to 100% of any outstanding rentals - although once again, these figures vary from funder to funder. 

If you'd like to discuss a settlement quotation, contact Nationwide Vehicle Contracts on 0345 811 9595 and we'll be happy to discuss your options.

7. What level of wear and tear is acceptable?

One of the biggest misconceptions when it comes to car leasing relates to fair wear and tear.

It is not possible to return a car in the exact same state as it was given to you after 3 years of use - unless you locked it away in a garage for the whole length of the contract and never used it! So what is termed as ‘normal’ wear and tear is accepted when returning the car at the end of a leasing period.

Although each finance company provides its own guidelines as to what is acceptable wear and tear, based on the age and mileage of the vehicle, we have produced our own wear and tear guide so you can see here just what is expected.

8. Can I customise or modify my lease vehicle?

Some small and reversible modifications may be permitted by the funder but these modifications are at your own risk and may invalidate the vehicle warranty. The modification also must be removed without damaging the vehicle and before it is returned at the end of the contract.

It is advised that you speak to your sales advisor to see what permission is required, and what restrictions there are, but all depends on what modification you want to do, the manufacturer and the finance provider.

Acceptable modifications include the addition of tow bars, a dashboard camera, a vehicle tracker, a Black Box, roof rack or racking, or van ply lining. Most finance providers will also allow you to wrap the vehicle with company decals provided they are removed prior to return at the end of the lease.

9. Can I add a private registration plate to the car?

Subject to obtaining the funder’s permission, there should be no problem with adding a private registration plate (also known as cherished plate) to your leased vehicle.

Check out our blog post on private registration plates for more information on adding a cherished plate to your vehicle including the fees charged by the finance provider and the time scales involved.

10. What are the hidden charges?

Here at Nationwide Vehicle Contracts, we pride ourselves on complete transparency so provided you stick within the agreed perimeters of your contract, there should be no charges at the end of your lease agreement. Any questions you may have are fully explained before you take delivery and any other answers can be found in our FAQ section on the website. 

Still have a question regarding car leasing? Leave a comment below or call Nationwide Vehicle Contracts today on 0348 811 9595.

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